Germany > Legal entities > Freistellung – Exemption from withholding tax
Freistellung:
Exemption from withholding tax
in Germany
Do you carry out construction work in Germany? Without an exemption from the withholding tax (Freistellungsbescheinigung), your client is obliged to deduct 15% from each of your invoices. We will arrange your Freistellung so that you receive the full amount — without deductions and without needlessly waiting for a refund.
- We have already arranged thousands of withholding-tax exemptions
What Freistellung is and why you need it
German legislation is clear: if you carry out construction activity, or work related to real estate, on German territory, your client is obliged to deduct withholding tax (Bauabzugsteuer, 15%) from your invoices.
If they have already deducted the withholding tax, you can request a refund, but only after the end of the relevant calendar year — meaning you wait over a year for your money. That’s why it pays to have Freistellung arranged before your very first invoice is paid.
We'll make sure withholding tax doesn't cost you part of your fee
We will handle registration at the German Finanzamt, the Freistellung application, or any refund of already-deducted tax for you. When you leave it to us, you get:
- Full payment of your invoices: With a valid exemption, your client will pay you the full invoice amount — no 15% deduction and no waiting over a year for a refund.
- Better cash flow: Your funds won’t be frozen at the German tax office — you can actually put them to work and finance further contracts.
- Credibility with clients: A valid Freistellung is a signal that your paperwork is in order. General contractors will be more willing to hire you.
- No problems with subcontractors: We will check the chain and keep an eye on where a deduction obligation may arise, so that you don’t end up in dispute with the German tax office.
- A partner who speaks your language: We will handle the application and communication with the authority in German for you. We will explain everything to you in English.
Contact us today to arrange an initial consultation
We will review your situation and arrange Freistellung so that you get paid in full for your work.
Freistellung for companies — solutions tailored to your situation
Whether your company is preparing for its first project in Germany or the customer is already withholding Bauabzugsteuer, we will help you choose the right next steps.
When does a construction company need a Freistellung for its first project in Germany?
If a company provides construction services in Germany and wants to avoid withholding from the payment, it must present the customer with a valid Freistellungsbescheinigung no later than before the invoice is paid. Without a valid exemption certificate, the customer is generally required to withhold 15% of the consideration and remit it to the competent German tax office. ProfiDeCon handles the registration and Freistellung application so that, where possible, the certificate is available before the first payment.
How can a company recover construction withholding tax already deducted in Germany?
Construction withholding tax already deducted can, subject to the statutory conditions, be credited against the company’s tax liabilities or refunded upon application. After the relevant year has ended, the appropriate procedure must be determined based on the company’s tax position and the withheld amounts must be documented. ProfiDeCon reviews the requirements, prepares the supporting documents and submits the refund application where the statutory conditions are met.
Does every subcontractor need a Freistellung for construction work in Germany?
When a company receives construction services from a subcontractor, it becomes the customer for those services. If the subcontractor does not present a valid Freistellungsbescheinigung at the time of payment, the company is generally required to withhold 15% of the consideration and remit it to the competent German tax office. ProfiDeCon reviews the subcontracting chain and helps obtain the required Freistellung for the individual parties.
How can I determine whether my activity is subject to construction withholding tax in Germany?
The actual nature of the service is decisive, not merely the title of the project or contract. Under Section 48 EStG, construction services are services used to construct, repair, maintain, alter or remove a structure. ProfiDeCon reviews the description of your activities and advises whether registration and a Freistellung are required.